ALEX BRUMMER: Sir Mervyn King takes on the critics

The contrast could
not be greater. Last
year the Today show
lecture was delivered
by Bob Diamond
of Barclays, the person
who, in the public mind,
is seen to epitomise rapacious
behaviour in the
boardroom.

This year it was Sir Mervyn King,
often the subject of criticism in the
City, because of his determination
to take on the big banks by insisting
that they conserve capital by
moderating dividend pay-outs and
the ‘me first’ culture in the
boardroom.

Diamond, who has sought to
make the running as a good corporate
citizen, undid a great deal of
the respect he has earned by his
insistence that the bank pay his
£5.7million US tax bill.

Taking to the airwaves: Bank of England governor Sir Mervyn King

For aficionados of the Bank of England,
the most fascinating aspect of
King’s speech will be the mea culpa.
King has been widely criticised for
the Old Lady’s own failure to offer
concrete warnings on the stresses in
the financial system before August
2007, when the credit markets froze
over. Now he says ‘we should have
shouted from the rooftops’ that
light-touch regulation had failed to
stop the banks from getting so big
that they couldn’t fail.

It is remarkable to think that no
governor of the Bank of England
has felt it necessary to take to the
airwaves in what Franklin D. Roosevelt
famously called a ‘fireside
chat’ since Montagu Norman in the
aftermath of the Great Depression
more than 70 years ago.
It is to be hoped that King’s decision
does not frighten the horses
too much.

What the governor makes clear is
that the Great Recession, and the
financial crisis which accompanied
it, is far from over.

The threat of an implosion in euroland,
where our banks are heavily
invested, means that they need
every bit of regulatory capital that
they can get hold of to withstand
the whirlwind. King directly takes
on those banks including Barclays,
HSBC and Standard Chartered,
each of which has said at various
times that if the government comes
down too hard in terms of regulation
they might be inclined to pack
their bags and move offshore.

‘We see vested interests rise up to
defend their bonuses and profits,’
he says.

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One of the more encouraging
things in the past month or so is that
fund managers have risen up in unison
against fat-cat pay at the banks.

Citigroup saw a 55 per cent vote against
pay and Barclays was given a hiding
along with Alison Carnwath,
one of those at the centre of a cosy,
back-scratching pay culture in the
Square Mile.

The governor wants to see tough
legislation, setting up the new regulatory
apparatus and forcing the
ring-fencing of utility from casino
banking in place as soon as possible,
even if full implementation
doesn’t take place until 2019.

In much the same way as setting
firm fiscal plans has helped Britain
keep its ‘AAA’ credit rating, enacting
new rules for banking would
underpin confidence in the financial
system.

Sky high

News Corporation, as owner of
39 per cent of BSkyB, would be mad to
retreat voluntarily from the satellite
broadcaster.

Even if Ofcom were to echo some
of the comments made in the
deeply flawed Commons Select
Committee report and adjudge
Rupert and James Murdoch as
unfit to hold a broadcasting licence,
it should not be beyond the wit of
the BSkyB board to ring-fence the
stake from Murdoch influence.

It could, for instance, be made
non-voting and to ensure independence
from News Corp, the
Murdoch time servers and friends
could be expelled from the board.

Meanwhile, BSkyB shareholders
should relish the fact that the News
Corp bid for the minority has failed.

The performance of Sky under
the leadership of Jeremy Darroch
is encouragingly strong with pretax
profits in the first nine months
up 25 per cent at £939million.

Despite the recessionary climate
the group is pushing up subscriptions
by adding more and more broadband
and telephony customers.

Also, importantly for Britain, it
shows no signs of cheap-skating on
programme making.

Formula 1 has been transformed
in viewer experience by the switch
to Sky.

Being a minority investor in this
company is not a bad place to be –
despite all of the political noise.

Bad Home

Is Argos doomed? On paper at
least there was no company in Britain
that ought to have been better
prepared for the online revolution.

It had the catalogues, the systems
and a distribution network ideally
suited to the new world.

Unfortunately, the Argos internet
experience, like most of their
stores, is caught in a Soviet era
time warp.

Dumping the shares of its owner
as profits plummet and the dividend
is axed may be the least risky
option.